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Odebrecht hands pipeline management to partners because of graft probe

Brazilian engineering group hands management of its $5 billion natural gas pipeline project in Peru to protect the project from any impact of a massive corruption inquiry

A federal police agent is pictured in front of the headquarters of private Brazilian construction firm Odebrecht, one of the main companies at the center of the nation's biggest corruption probe, in Sao Paulo
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2 years ago

LIMA, Peru – Brazilian engineering group Odebrecht handed management of its $5 billion natural gas pipeline project in Peru to its junior partners to protect the project from any impact of a massive corruption inquiry in Brazil, the company said Friday.

General manager Rodney de Carvalho and financial manager Marko Harasic will be replaced by officials with Spanish utility Enagas SA and Peruvian construction company Grana y Montero SAA, the pipeline consortium said.

Odebrecht is under investigation in Brazil for its involvement in a graft and influence-peddling scandal known as “Operation Car Wash.” Marcelo Odebrecht, who had run the family-owned company from 2008 until recent months, was sentenced this week to 19 years in prison in connection to the scandal.

The unanimous decision by shareholders in the pipeline project aimed to “take distance from current events linked to Operation Car Wash in Brazil, and to avoid the impact of that process, which is completely unrelated to the concessionaire, from affecting its performance in any way,” the consortium said in a statement.

People protest in support of former Brazilian President Luiz Inacio Lula da Silva in Sao Paulo, Brazil, March 11, 2016. The banner reads "Not coup in defense of democracy" REUTERS/Paulo Whitaker

People protest in Sao Paulo, Brazil, March 11, 2016. Photo: Reuters/Paulo Whitaker

The stakes held by each company in the project are unchanged, with Odebrecht controlling 55 percent, Enagas 25 percent and Grana y Montero owns 20 percent.

The consortium won the lucrative contract in 2014 after its sole competitor was disqualified at the last minute. Odebrecht’s previous plans to build a similar pipeline had been snagged on a lack of financing.

Odebrecht and state bidding agency Proinversion denied allegations from the disqualified consortium that the auction was rigged.

The attorney general’s office has been investigating potential wrongdoing in the pipeline bid for more than a year, but has not present any charges so far.

In Brazil, Odebrecht has been considering selling its majority stake in petrochemical producer Braskem SA as it seeks to ease a debt burden that has swollen as the scandal has undercut its access to financing.

Braskem had planned to build a polyethylene plant in Peru that would be hooked up to the 1,000-kilometer pipeline, which will transport gas from the Amazon to the Pacific coast.

The pipeline is an emblematic project for President Ollanta Humala, who had hoped it would feed a future petrochemical complex and fast-growing demand for electricity.

Brazilian police said last month that they were investigating potential bribes of $3 million from Odebrecht to Humala. Humala and Odebrecht denied wrongdoing.

The pipeline consortium was still arranging for $4.1 billion in loans late last year to complete 80 percent of construction on the project.

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